When Rakesh Gangwal requisitioned an extraordinary general meeting of IndiGo shareholders on January 29, several analysts and market participants thought that it would mean an easier path for the promoters to reduce or increase their shareholding in the airline. Some even interpreted it as a chalked-out exit path for Gangwal as the industry veteran had sought shareholders’ nod to delete those rules in IndiGo holding company InterGlobe Aviation's articles of association which give co-founder, Rahul Bhatia, the right of first refusal should Gangwal choose to sell his shares.
On January 29, over 51 percent of IndiGo shareholders rejected Gangwal’s proposal to make changes in the rules regarding sale and purchase of shares. It is safe to assume that Bhatia and his family, who own the largest stake in IndiGo at 38.3 percent, have not voted in favour of the special resolution as Gangwal and his associates hold 36.7 percent in IndiGo while the remaining 25 percent of stake is held by the public.
“The outcome of this EGM has left the matter of promoters differences in limbo. There was an expectation that this EGM agenda would settle the dispute and will mean exit of one of the two promoters, and the proposal indicated that the exit would eventually be of Rakesh Gangwal. But the one-way amicable settlement that we were hoping for has not really taken place. The issues are still lingering on and have not been addressed despite been ongoing since 6-7 months,” an analyst said on condition of anonymity.
>> Analysis: At IndiGo, there are signs of truce but not peace
It is important to note here that while Gangwal requisitioned the EGM for January 29, he and non-executive independent director of the company Dr Anupam Khanna were not present at the venue. This irked majority of shareholders who were present at the EGM and several of them expressed their anger in an aggressive manner. The situation became stormy to the extent that IndiGo chairman M Damodaran had to call security to cordon off the area near the stage.
“Gangwal, who requested this EGM, is not present here then why were we called for this? Why are you wasting our time and energy?” a shareholder present in the EGM questioned the members of the board.
While Gangwal has traditionally not attended the annual meeting of shareholders, he was widely expected to be present at the EGM. This was the second time that Gangwal skipped a shareholders’ meeting after the bitter spat between the two promoters of IndiGo emerged in the public light in July 2019. He was also absent at the company’s annual general meeting on August 27, 2019 .
Bhatia, who co-founded IndiGo with Gangwal in 2005, was also silent throughout the EGM meeting. This was in stark contrast to the August 2019 AGM when he was interacting with upset and concerned shareholders in a more relaxed way. This time the shareholders who were previously upset had turned furious and board members, who were earlier interactive, had turned largely silent.
>> IndiGo EGM: What co-founder Gangwal needs for the restrictions on stake sale to go
This can be understood from the difference in content of questions and the manner in which they were asked and answered by the shareholders and company management respectively at the AGM and the EGM. While at the AGM, shareholders thought of the issue as a minor misunderstanding between the two promoters and some suggested them to go for a vacation together for settling differences, resulting the house to break into laughter. At the EGM, there was just tension in the air.
"The company CEO has maintained since the differences came out in the open that this will not impact the airline and it is a matter between the two promoters. In a recent analyst call as well, the management reiterated that. Naturally, it will be better for a shareholder if everything was peaceful at the top of the company but we continue to be positive about the stock," another analyst said requesting anonymity.
Currently, a legal battle continues to be fought overseas between the two promoters regarding the allegations made by Gangwal and Dr Khanna that corporate governance standards are regularly violated at IndiGo.
IndiGo, the largest airline in India, completed 2019 with a fleet of over 250 aircraft, cornering a 47.1 percent market share in domestic air traffic and was the second largest international player among Indian airlines.
